State Farm Auto. Ins. Co. v. Reaves

• Decision Date: 07 March 1974
• Citation: 292 Ala. 218,292 So.2d 95
• Parties: STATE FARM AUTOMOBILE INSURANCE COMPANY, a corporation v. James Dorsey REAVES et al. SC 450.
• Court: Alabama Supreme Court

Page 95

292 So.2d 95

292 Ala. 218

STATE FARM AUTOMOBILE INSURANCE COMPANY, a corporation v. James Dorsey REAVES et al.

SC 450.

Supreme Court of Alabama.

March 7, 1974.

Rehearing Denied April 11, 1974.

Rives, Peterson, Pettus, Conway & Burge and Timothy M. Conway, Jr., Birmingham, for appellant.

John T. Roach, Jr., Birmingham, for appellees.

BLOODWORTH, Justice.

I.

The primary question presented by this appeal is whether the trial court erred in ruling that the policy exclusion of uninsured motorist coverage to an insured while driving a motor vehicle (owned by a resident of the named insured's household) which is not described in the policy is void as violative of Alabama's Uninsured Motorist Statute, Tit. 36, § 74(62a), Code of Alabama of 1940, as amended. We hold that the trial court did not err, the provision is void, and we affirm.

The parties to this appeal appear to agree upon the basic facts in this cause. Appellee James Reaves, a minor, suffered serious injury when the motorcycle he was riding was struck by a pickup truck driven by an uninsured motorist. The motorcycle, owned by appellee Catherine Reaves, his mother, was not insured. But, James was an 'insured' under the omnibus clauses of two policies issued by appellant, State Farm Mutual, to Annie Ruth Franklin, daughter of Catherine Reaves and sister of James, all residents of the same household. (The policies being identical in all material respects, we will hereinafter refer to the singular.)

The State Farm policy, however, contained the following exclusion:

'THIS INSURANCE DOES NOT APPLY:

(b) TO BODILY INJURY TO AN INSURED WHILE OCCUPYING OR THROUGH BEING STRUCK BY A LAND MOTOR VEHICLE OWNED BY THE NAMED INSURED OR ANY RESIDENT OF THE SAME HOUSEHOLD, IF SUCH VEHICLE IS NOT AN OWNED MOTOR VEHICLE,'

Definition of 'Owned Motor Vehicle'

'Owned Motor Vehicle--means the motor vehicle or trailer described in the declarations, . . ..'

The State Farm policy contained the following definition of the word 'insured':

'Insured--the unqualified work 'insured' includes

(1) the named insured, and

(2) If the named insured is a person or persons, also includes his or their spouse(s), if a resident of the same household, and

(3) if residents of the same household, the relatives of the first person named in the declarations, or of his spouse, and

(4) any other person while using the owned motor vehicle, PROVIDED THE OPERATION AND THE ACTUAL USE OF SUCH VEHICLE ARE WITH THE PERMISSION OF THE NAMED INSURED OR SUCH SPOUSE AND ARE WITHIN THE SCOPE OF SUCH PERMISSION, and

(5) under coverages A and B any other person or organization, but only with respect to his or its liability for the use of such owned motor vehicle by an insured as defined in the four subsections above.'

James and his mother Catherine Reaves, who held title to the motorcycle, filed claims under the policy. State Farm denied the claims relying upon the above quoted exclusion. James and Catherine Reaves then sued State Farm for a declaratory judgment seeking an adjudication of their rights under the policy and specifically seeking a declaration that the exclusion relied upon is void. Trial was had before The Honorable William C. Barber, Circuit Judge, without a jury. After the trial, a declaratory judgment favorable to the Reaves was rendered against State Farm; and judgments were rendered for James Reaves for $15,000 and for Catherine Reaves for $5,000, together with interest at six percent from February 15, 1970, the date of which State Farm received notice of the occurrence. It is from this declaratory judgment that State Farm appeals.

The primary question raised by this appeal presents a case of first impression in Alabama. Looking to our sister states, we find three decisions on this point based upon quite similar uninsured motorist statutes and policy exclusions.

Appellees urge us to follow the most recent of these cases, Mullis v. State Farm Mutual Automobile Insurance Co., 252 So.2d 229 (Fla.1971). In Mullis the Supreme Court of Florida in an extensive opinion held the exclusion void under the Florida statute based upon reasoning that the uninsured motorist protection required by the statute was intended 'to provide the reciprocal or mutual equivalent of automobile liability coverage prescribed by the (Florida) Financial Responsibility Law, i.e., to say coverage where an uninsured motorist negligently inflicts bodily injury or death upon a named insured, or any of his family relatives resident in his household, or any lawful occupants of the insured automobile in his automobile liability policy.' By this decision, appellant argues the Florida court has judicially created a mandatory class of insureds which must be covered in every automobile liability policy issued in that state.

If such be the holding of the Florida court in Mullis, we cannot quarrel with this result. (We take note that many states have achieved this same result by legislative action.) We, however, cannot divine such an intent from the language of our Alabama statute. If it is deemed desirable to require insurance companies in Alabama to provide coverage to a certain class of persons in all policies under our 'Motor Vehicle Responsibility Act,' we think it necessary that the legislature say so specifically.

On the other hand, appellant urges us to follow the cases of Shipley v. American Standard Insurance Company of Wisconsin, 183 Neb. 109, 158 N.W.2d 238 (1968) and McElyea v. Safeway Insurance Company, 131 Ill.App.2d 452, 266 N.E.2d 146 (1970). Both the Nebraska and Illinois courts summarily reject any challenge to the validity of the exclusion with only a bare minimum of discussion. Likewise both courts viewed the issue primarily as one of construction of the terms of the insurance contract and whether the facts there presented fell within the scope of the exclusion. But, both these courts fail to address themselves to the fundamental question as to whether the uninsured motorist statute curtails the right of contracting parties to include such an exclusion.

In the case before us, the meaning of the exclusion in the contract is relatively clear. The crucial question we must meet and answer is whether the exclusion is barred by the provisions of Tit. 36, § 74(62a), Code of Alabama of 1940, as last amended, which reads as follows:

'No automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in subsection (c) of section 74(46) of this title, under provisions approved by the commissioner of insurance, for the protection of Persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, that the Named insured shall have the right to reject such coverage; and provided further, that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured had rejected the coverage in connection with the policy previously issued to him by the same insurer.' (Our emphasis.)

Appellant urges us to read the above quoted statute as requiring uninsured motorist coverage only for the Named insured, and contends that since uninsured motorist coverage of relatives resident in the named insured's household is not required, the insurer is free to limit the scope of any coverage it chooses to extend to this class of insureds.

We cannot agree that § 74(62a) is subject to such a construction. The plain language of the statute provides that '(n)o automobile liability * * * policy * * * shall be delivered or issued * * * in this state * * * unless coverage is provided therein * * * for the protection of Persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles * * *.' The statute does not read 'named insured'; by the literal words of the statute, it mandates uninsured motorist coverage for 'persons insured thereunder' in the policy.

Nor are we convinced that the legislature meant to require coverage only for the 'named insured' when it stated 'persons insured thereunder.' ¹ Section 74(62a) goes on to speak of the right of the 'named insured' to reject such coverage. The use of the broader term 'persons insured thereunder' and the narrower term 'named insured' in the same sentence appears to us to indicate clearly that the legislature intended to draw a distinction between the two types of insureds, and did indeed intend to require uninsured motorist coverage for the broader class 'persons insured thereunder.' Moreover, the use of the plural 'persons insured thereunder' in one clause and the singular 'named insured' in the other would indicate that the legislature envisioned that, in the type of policy in question here having the usual 'omnibus clause,' uninsured motorist coverage was intended to be extended to All 'persons insured thereunder,' without regard to the mentioned exclusion.

While we do not read the statutes as requiring every automobile liability insurance policy to include an 'omnibus clause,' nevertheless once an automobile liability policy is issued extending coverage to a certain class of insureds under such a clause, uninsured motorist coverage must be offered to cover the same class of insureds. Appellant admits that appellees here come within the policy definition of the word 'Insured' being relatives of the named insured and residents of the same household.

It is, therefore, that we...